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Minnesota Senate Raises the Bar on Tax Increases

Imagine this: Your state already ranks 7th in the nation for the highest state-local tax burden. It has already lost $4.1 billion in net adjusted gross income (AGI) to other states with lower tax structures. It currently ranks 29th on the Best/Worst States for Business rankings conducted by chiefexecutive.net. Given this, why would you consider raising taxes even higher? Additionally, data clearly shows that every other state that has totally eliminated, or is reducing state income taxes with an eventual zero income tax target, are showing phenomenal AGI growth. Wouldn’t it be a more logical approach to follow in the tracks of the winners? Apparently not in the state of Minnesota.

It took two rounds of voting, and no doubt some arm-twisting, but the state senate has passed its own tax reform bill, doubling down on the already oppressive tax reform proposal recently announced by Governor Mark Dayton. The governor’s plan had asked for a tax increase to be levied against the top 2 percent of Minnesota’s wage earners. Dayton would impose a tax of 9.85 percent on taxable income over $150,000 for single filers and $250,000 for married joint filers. The tax rate for the current top bracket is 7.85 percent. Dayton’s proposal would give Minnesota the fourth-highest rate in the nation behind California, Hawaii, and Oregon. The senate’s package is even worse. It would affect the top 6 percent of earners. It would target individual filers at $79,000 a year and joint filers at $140,000 a year, clearly reaching down into middle-class territory.

Then there is the sales tax side. The senate bill reduces the tax from its current 6.875 percent down to 6 percent. At first glance, this would appear to be a move, though a small one, in the right direction. Unfortunately, the reduction of 0.875 percent will be more than offset by an astonishingly long list of tax extensions. These would now include tax increases on cigarettes, clothing, sports memorabilia, over-the-counter drugs, personal services (even wedding planning), auto repair services, and household goods repair and maintenance, to name just a few. As you might imagine, the state is also lobbying hard for the additional internet sales tax revenue.

The rationale for all of this is to help reduce budget shortfalls and provide additional money for education. But in my opinion, the lawmakers are overlooking or ignoring the potential dire consequences of continually increasing the burden on Minnesota taxpayers. As a group, Midwesterners are some of the hardest-working people in America. Why any state would want to inflict yet more fiscal pain on citizens, rather than get its expenses under control, is beyond me. But like anyone else, these people can only be pushed so far. Eventually there will be a tipping point in this taxation run amok. It would only be natural for Minnesotans to start thinking, “Why should I work so hard or start my new business here, when the state is just going to take more of my money away in taxes?”

And as far as those “top 2 percent wage earners” go, the ones the government always targets as both the cause and solution to their money problems –well, state legislators should pay more attention to history. In today’s mobile society, these “two percenters” can afford to simply pack up their families, businesses, and wealth and just leave! Many already have, and have taken $4.1 billion dollars with them.